George Osborne yesterday asked the competition authorities to look into the RBS spin-off Williams and Glyn to make sure it is big enough to challenge other banks in the market.
Bailed-out giant RBS has to carve the unit out of its existing branch and customer network, under terms imposed by the European Commission at the time of its taxpayer-funded rescue.
The aim is to increase competition in the market, and to reduce the size of RBS. The current plan is to float Williams and Glyn on the stock market before the end of 2016.
It follows a similar move at Lloyds Bank, which floated TSB last year.
Williams and Glyn is more focused on business customers, and is set to have 200,000 small business customers as well as 1.4m retail customers and 307 branches.
The government asked the Competition and Markets Authority “to assess the likely impact on competition of the new bank, taking account of changes made to its business plan and shape”.
Depending on the outcome of that review, which will report back in July 2015, “HM Treasury and RBS will... agree appropriate next steps”.
RBS said it remains focused on setting up the standalone bank, a task on which almost 5,000 staff are working.